GLOBAL MARKETS-Shares, euro rise on ECB action hopes, Bunds dip

July 27, 2012|Reuters

* World stocks up 0.4 pct

* Euro edges higher

* Bunds slip back, Spanish debt yields ease

By Simon Jessop

LONDON, July 27 (Reuters) - World stocks extended gains andthe euro edged higher on Friday as markets bet on newintervention from the European Central Bank to help stop debtmarket pressure on peripheral euro zone countries fromspiralling out of control.

ECB President Mario Draghi's promise on Thursday to dowhatever it takes within the bank's mandate to defend the singlecurrency prompted a rise in shares and the euro, as well as afall in German Bund prices and an easing in yields on Spanish bonds. All those trends continued on Friday.

At 0702 GMT, world stocks were up 0.5 percent,while blue-chips in the euro zone climbed 0.3percent.

The euro was up 0.1 percent at $1.2289, Bund futureswere down 25 ticks to 143.76 and 10-year bond yields in Spain,in the frontline of the debt market attack, eased to 6.9percent.

Draghi's remarks were short on detail but some peoplespeculated that the ECB could announce after its policy meetingnext Thursday that it will start buying bonds again under itsSecurities Market Programme (SMP).

"Mr Draghi's comments have intensified the interest leadinginto next week's ECB meeting where the market is now expecting,at a minimum, a further 25 basis point (interest) rate cut, withthe hopes of some SMP intervention for good measure," CameronPeacock, Market Analyst IG Markets, said in a trading note.

However, the ECB has not bought bonds for months under theprogramme which has drawn criticism of its effectiveness.

The bank could also "raise the bar" for the U.S. FederalReserve, which meets a day before the ECB, said Peacock. Recentpoor data in the world's largest economy has left many in themarket hoping for signs the Fed would do more to stimulategrowth.

Hopes for more action from the major central banks alsounderpinned gains in a range of commodities that would benefitfrom increased demand following any liquidity boost, with U.S. crude oil up 0.6 percent and copper up 0.8percent.